Paraguay electric and hybrid vehicle tax proposals

The National Directorate of Tax Revenues (DNIT) in Paraguay has proposed a gradual phase-out of the current 100% tax exemption for electric and hybrid vehicles. The plan suggests reducing the Value Added Tax (IVA) from its current exempt status to an initial 5% rate, with incremental increases toward the standard 10% rate by 2033.

DNIT head Óscar Orué stated the measure is the “removal of an existing exemption” rather than a new tax. He specifically noted that hybrid vehicles should not receive the same treatment as pure electric vehicles due to their internal combustion engines. The proposal is estimated to generate approximately US$ 30 million in revenue and awaits a final definition from Congress. The potential change has drawn concern from groups such as the Federation of Platform Drivers.

Following negotiations with the Chamber of Automotive and Machinery Distributors (CADAM), the Executive Branch has softened its initial stance. While the DNIT originally considered a 10% customs tariff, a preliminary agreement maintains a zero-rate customs tariff during the initial stage, limiting the immediate fiscal impact to the 5% IVA. Subsequent sales of these vehicles will be subject to the general 10% tax rate. The government has outlined a transition period to mitigate market impact, with a definitive regime expected to be fully implemented by 2032.